OVERVIEW FOR SMALL BUSINESSES OF FEDERAL CARES ACT-MARCH 29, 2020

 

This is for informational purposes only. Please check with your own tax advisers and or other advisers before taking any specific action.

 The federal regulations which will set forth the details of how these programs will work have NOT yet been issued but expected very soon.  Until those details are issued, the nuts and bolts are still not known.

 It would be prudent to gather your current and past profit and loss statements, and monthly costs in preparation for seeking relief under any of the currently available programs.

FOUR KEY AREAS FOR SMALL BUSINESSES

A.  UNEMPLOYMENT BENEFITS

Lay-off or reduction of hours for employees are eligible for Montana unemployment benefits with no wait time to start receiving those benefits and no negative impact on employer.  Also the federal Cares Act added $600.00 per week to those unemployment benefits.  

B. SBA DISASTER LOAN RELIEF

Montana has been declared a disaster area.  As such, small businesses can apply for a disaster loan to assist in business operations; EXCLUDING pay roll. (there is a separate pot of funds for that discussed below).

Apply for this through your local lender

One significant change to this program is that under the federal Cares Act, lenders must provide an applicant with an advance $10,000 in 3 days, with no payback even if loan is not granted.  The turn-around time is to be reduced to 15 days, also:

  • Up to $10M working capital loan for small businesses

  • Interest rate: Business: 3.75% or Nonprofit: 2.75%

  • Some requirements waived, including personal guarantee

C. PAYCHECK PROTECTION PLAN (PPP)

  • $10M loan limit

  • Sole proprietors, independent contractors, and self-employed also eligible  

  • 501 c(3) Lenders have authority to approve loans – SBA not needed

Lender can only consider whether:

  • Borrower was in operation on February 15, 2020

  • Borrower paid employee salaries/taxes or paid independent contractors 

Key is the forgiveness of this loan:

This is based on keeping employees employed through June 30, 2020, if you do not, it is a sliding scale for forgiveness.

D. WITHDRAWALS AND LOANS FROM RETIREMENT SAVINGS

Allowance for early withdrawals (up to $100,000) from IRAs/eligible employer plans without penalty for those affected by the virus.

  • These withdrawals will not be subject to any mandatory tax withholding

  • These withdrawals will not be subject to the early withdrawal penalty for those under age 59 ½

  • Allows repayment of these withdrawals within a three-year window to avoid any tax, provided the plan allows for rollovers into the plan

  • The tax for the withdrawal (if not repaid) can be spread out over a 3-year tax period

These withdrawals are also available to IRAs. 

Please continue to check our website mswdlaw.com for updates.

You may also e-mail Lin Deola using the form below.